June 2014

The future of the Terrorism Risk Insurance Act (TRIA), slated to expire on December 31, 2014 in the absence of Congressional action, has been consistently trending as one of the top headlines in insurance industry news.

Earlier this year there was a lot of hype about how the Western Pacific Typhoon Season was off to a jackrabbit start. First, let’s get one thing straight: there is no such thing as a season in the Western Pacific Typhoon Basin. Typhoons can—and do—form in any month of the year.

At its core, AIR is a catastrophe modeling company. The risk that natural disasters and other catastrophes pose to the insurance industry is at the forefront of our research and products.

Few lines of business are as complex or as challenging from an underwriting perspective as crop insurance. The sheer number of variables at play—from the impact of the weather across different stages of growth, to the tolerance of different crops to environmental stress, to location-specific farming practices and technological change—make estimating potential crop losses a daunting task.

Hail has been hitting the headlines lately as severe thunderstorm systems moved across Europe, pelting France, Belgium, and northern Germany with damaging hail. But chances are, when you think about catastrophes that cause billions of dollars in insured losses, the first perils that come to mind are hurricanes, earthquakes, or floods. But hail? Probably not in Europe.

You can’t ignore it. Whatever your thoughts on causes and effects, the world’s climate is changing—and this has far-reaching implications for the insurance industry both now and in the future. That’s because changes in the climate and weather patterns have the potential to affect extreme weather events.

When underwriting a policy, how do you guard against adverse selection? How many variables go into your underwriting decision process?

Death and taxes may be certain, but preseason hurricane forecasts are quite the opposite. Last year’s preseason forecasts for above-average hurricane activity were famously wide of the mark, undone by a combination of shorter-term weather patterns over the Atlantic basin that dampened hurricane formation and activity.